Assets Held in Trust

What is a trust?

The concept of a trust goes back hundreds of years to the Crusades. Before leaving their homes and families for the Crusades, English knights would leave their property and other assets “in trust” with a loyal friend for the benefit of the knight’s heirs should he not return.

A trust is an agreement made when the ownership of assets, both equitable and legal, are transferred in trust to an entity to be managed by a second party, the Trustee, for the benefit of the first party (self-settling trust) or for the benefit of third parties (beneficiaries).

The concept has been enhanced over time. Trusts have become an exceptionally efficient means to protect assets and transfer wealth to heirs while maintaining maximum privacy. Trusts have become a fundamental component of a good estate plan.

Historically, trusts were so costly to establish and maintain that only affluent people made good use of them. Due to progressive trust legislation in financially savvy international jurisdictions, international asset protection trust is affordable for today’s successful businessperson or professional.

Why use a trust?

There are many sound reasons to form a trust, including:

  • Asset Protection
  • Estate Planning
  • Preserving Family Wealth
  • Business Continuation
  • Confidentiality
  • Tax Planning
  • Avoiding Probate

Asset Protection

Protecting a family’s hard-earned assets is the primary purpose of an asset protection trust. The media continuously tells stories of staggering jury awards that are based on the most frivolous litigation. Everyone is a target. If you have worked hard to build a financial nest egg for your retirement and your family’s financial security, chances are good that you have become an even larger target.

Less than five percent (5%) of the world’s population lives in the U.S., but seventy percent (70%) of the world’s attorneys live in the U.S. Ninety-four percent (94%) of the world’s lawsuits are filed in U.S. courts-100 million and counting, with 15 million new suits being filed each year. Frivolous lawsuits and incomprehensible jury awards are destroying medical practices, wiping out businesses and costing the world’s economy billions of dollars. The trend only appears to be growing worse. In fact, if you own a business there is a one in three chance that you will be hit with a lawsuit this year. You could lose everything.

While many people desire to protect their assets and reduce their taxes, at the same time they wish to maintain a high degree of confidentiality over personal affairs, and maintain the ability to transfer their wealth to their heirs without paying confiscatory taxes, hiring costly lawyers, or losing control of their estates to the courts.

With an impeccable track record for integrity and honesty, SCT provides the highest degree of confidentiality, anonymity and asset protection in a cost effective structure.

The SCT Asset Protection Trust (APT) is inherently more protective and can provide major advantages over U.S. domestic trusts. Unlike a U.S. domestic trust, SCT’s properly structured APT can maintain control of present and future ownership and provide income and estate tax savings. Perhaps the most important difference between the SCT formed APT and a U.S. Domestic Asset Protection Trust is that SCT allows the grantor/settlor to be a discretionary beneficiary of the trust (self-settled trust) without losing the ability to protect the trust assets. Although a few U.S. states have amended their trust statutes to allow self-settled trusts, there is no case law to support the Domestic Asset Protection Trust.

Assets entrusted to SCT are often held in custody with stable, well-established international banks, with no U.S. presence, to ensure maximum protection and privacy.

While some international banks are notorious for holding wired funds for several days, living on the "float," SCT’s banking relationships facilitate same-day transfers. SCT maintains its securities portfolios in the safekeeping of major securities clearinghouses.

At your direction, SCT will work with your independent investment advisor who may recommend prudent investments that meet your objectives and goals.

SCT strives to be a leader in complying with Anti-Money Laundering guidelines and requirements, Know Your Customer rules, and cooperates fully with the Financial Action Task Force. SCT conducts all business in a manner that is fully U.S. Treasury Department and Internal Revenue Code compliant.

Estate Planning

A properly designed trust will give you comfort in knowing that you have provided for your spouse, family members, or loved ones. If your goal is to provide for the education of your children or grandchildren, or to make a charitable contribution, a trust is probably the most flexible and satisfactory way to make sure your wishes are carried out.

Moving assets into a trust has the effect of moving those assets out of the grantor's estate and therefore out of the reach the U.S. probate system, and allows the estate to be distributed according to the grantor’s wishes. (NOTE: the trust never removes anything beyond the reach of the U.S. tax system for U.S. grantor's and beneficiaries.) This simplifies estate planning.

Moving assets into a trust does not compromise the grantor's needs now or in the future. You should know that the trustee must, by law, act at all times for the benefit of those persons specified by the grantor/settlor.

Preservation of Wealth

An important benefit of establishing a trust is protecting family assets, shielding wealth from creditors, and eliminating the possibility of assets being mismanaged, misused, or diverted toward frivolous pursuits.

Like a Last Will and Testament, a trust can be used for planning business succession, protecting or distributing investments or other assets to the grantor/settlor’s beneficiaries. Trusts may alleviate complications and the effects of probate and inheritance laws in the grantor/settlor's country of residence. If properly structured, trust assets can minimize taxes, and protect your family’s privacy by avoiding public probate proceedings and estate administration.

Trusts can also be easier to administer than a will. They are less vulnerable to legal challenges, and ensure that beneficiaries will receive the assets as the grantor/settlor intended.

If it is your desire to maintain family wealth and increase that wealth for the benefit of future generations, a trust is a most desirable planning tool. The trust may provide for payments to family members, heirs, or named entities as the need arises or as pre-determined by the grantor/settlor.

Business Continuation

No one wants to see the business they spent years building be divided, liquidated or sold upon their death. Effective transfer of your business to your successors is critical to ensure its continued success. By transferring ownership of a company into a trust, the businessperson is assured that the company will continue to function after the death of its primary owner, through an orderly transfer of ownership. In addition, provisions for the distribution of income from the business to family members or other beneficiaries can be structured within the trust.

Confidentiality

The establishment of a trust, and the transfer of assets, is not a matter of public record. A trust is treated as a private matter among the grantor/settlor, the trustee, and the beneficiary. Confidentiality is an important characteristic of trusts.

The trust may provide confidentiality as to the existence of the trust; the terms and provisions of the trust; the value and nature of the assets in trust; the identities and activities of the trustee and protector; and, the identities of the grantor/settlor and beneficiaries. On the other hand, Swiss Caribbean Trust complies with all reporting required by law. While there is a great deal of confidentiality surrounding the formation of a trust, a trust is not a means to avoid legally required reporting in your jurisdiction of residence.

Tax Planning

The Internal Revenue Code (IRC) has specific provisions for assets transferred to an international trust. Assets irrevocably transferred to a trust are deemed to be owned by the trust and managed by the trustee. However, for U.S. grantors/settlors, the IRC specifies that the grantor/settlor shall pay all applicable taxes or receive deductions for losses incurred by the trust. These gains or losses are reported on the grantor/settlor’s IRS 1040 return. Therefore, international trusts are tax neutral to the settlors of these trusts.

An asset protection trust can provide estate tax planning benefits, but the U.S. grantor/settlor is still responsible for reporting gifts and trust transactions to the IRS, as well as making informational reports. Therefore, a grantor/settlor should seek the advice of competent tax counsel in determining whether an asset protection trust meets their estate tax planning needs.

Tax advantages can be obtained through the purchase of U.S. Internal Revenue Code approved tax-deferred instruments such as annuities and life insurance policies.

Avoiding Probate

In most U.S. jurisdictions, estates will often have to go through probate. This can be a long and costly process. By its very nature, probate involves publicly disclosing information about the estate and all its assets.

By establishing a trust, probate can be avoided and confidentiality maintained. Ownership of the trust assets is transferred to the trust during the life of the grantor/settlor and is not included in the estate, thereby avoiding probate.

NOT Forming a Trust

Assets not protected by a trust could be put into jeopardy by any of the following scenarios:

  • Your company, retirement, and net worth could be devastated by a judgment based on a frivolous lawsuit.
  • A malpractice suit could destroy your professional practice.
  • Catastrophic medical bills could leave you destitute.
  • Your business could be sold and liquidated upon your death.
  • Your private financial information could be accessed and made public in a court action.
  • Your ability to accumulate wealth could be hindered by exorbitant tax rates.

Elements Of A Trust

The Trust Document

The Trust Deed or Declaration of Trust is a legal agreement that outlines, in detail, the relationship among the parties and the responsibilities of each party. The parties are the settlor(s), the trustee, the beneficiary(ies) and the protector (if desired). The Trust Deed will also describe the assets held in trust.

The Grantor/Settlor

The grantor/settlor is the entity that transfers ownership of the assets to a trust. The grantor/settlor can be a corporation, a person, or other legal entity capable of owning assets. The grantor/settlor is said to have created the trust. The grantor/settlor then has the right to appoint the trustee, name beneficiaries and select a protector if so desired.

The Trustees

The trustee is a corporation, person, or other legal entity named in the Trust Deed to manage the trust property. (NOTE: The trust, not the trustee, owns the transferred assets.) The law requires the trustee to manage the assets in accordance with the terms of the Trust Deed for the benefit of those beneficiaries named by the grantor/settlor.

The Beneficiaries

The beneficiaries are person(s), a corporation, or any other legal entities named by the grantor/settlor to benefit from the assets placed in the trust. The rights and benefits of the beneficiaries are spelled out in the Trust Deed.

The Protector

The role of a protector is to monitor the major acts of the trustee. The protector acts not as trustee but, rather, as the “guardian” of the trust. Appointing a trust protector provides added protection by allowing the protector to exercise the right to remove the trustee, appoint a successor trustee, and to take certain actions to protect the trust in cases of emergency. Like the trustee, the protector has a fiduciary duty to the grantor/settlor and the beneficiaries of the trust and, as such, must follow the purpose for which the trust was created.